Government announces major overhaul to UK's onshore wind subsidies
Updated: The UK Government has reversed its decision to effectively ban onshore wind, solar and energy storage from competing in the Contracts for Difference (CfD) rounds, following calls for a review to its renewables policy framework in light of the net-zero target.
Since it won the 2015 general election, the Tory government had largely excluded onshore wind and solar energy from support through CfD auctions while removing central government planning backing for such projects.
These exclusions have been repeatedly questioned since the UK Government set a legally binding net-zero target for 2050 last year - an aim which the Committee on Climate Change claims will require a quadrupling of domestic renewable energy generation. Critics have ranged from opposition MPs, to businesses with renewable energy interests, to think-tanks-and community groups, to Tory peers themselves.
BEIS’s newly appointed secretary of state Alok Sharma responded to these criticisms yesterday (2 March) by confirming that onshore wind, solar, floating offshore wind and certain energy storage projects will be able to bid in the 2021 CfD round - as will floating offshore wind farms, which purport to be capable of supporting larger turbine blades and of avoiding some of the biodiversity risks associated with traditional offshore turbines.
A consultation into how best to facilitate this change is now underway, with BEIS proposing separate pots for more established and less established generation and storage technologies, and, potentially, a third pot for floating wind as a standalone.
In its consultation documents, BEIS welcomed the emergence of subsidy-free solar and onshore wind in the UK, a trend it attributed to falling costs. But the documents also admit what many green campaigners have been stating for some time – that there is a risk these technologies will not proliferate widely or broadly enough for the UK to meet its climate targets, unless they receive price support from central Government.
“We expect that some of these technologies have the lowest costs and would be able to secure CfDs at strike prices below the average expected wholesale price for electricity, and so over the course of a contract may pay back as much, or more, than they receive in CfD top-up payments,” the documents state.
“Therefore, running an allocation round in 2021 which includes established technologies will help deliver a diverse generation mix at low cost, as well as give a clearer signal of the costs of these technologies, several years on from the previous auction.”
BEIS has additionally proposed to:
- Extend the delivery years for the CfD scheme until 31 March 2030
- Exclude new coal-to-biomass conversions from future auctions
- Strengthen the delivery incentives
- Review the supply chain policy to ensure local economies are supported
- Update the community benefits guidance for onshore wind to ensure commitments are honoured for the full life of a project and create opportunities for local communities to invest
- Address barriers to the co-location of storage with CfD projects
- Link the decommissioning regime for renewables into the CfD scheme
- Make a series of technical changes, including amending the formula for calculating the budgetary impact of contracts and introducing flexibility over the application of budgets and capacity caps
- Maintain the existing cap on phased offshore wind projects at 1.5GW
Announcing the proposals, Sharma said that ending the UK’s emissions footprint “means making the most of every technology available, and that includes backing more onshore wind and solar projects”.
He also re-affirmed former BEIS Minister Claire O’Neill’s commitments to a ‘just’ energy transition, stating that decisions on new onshore wind projects will be made “in a way that works for everyone, listening to local communities and giving them an effective voice in decisions that affect them”.
BEIS first indicated that it was considering a change to onshore wind policy last November, when a number of onshore wind projects were prequalified for the January auction round. The Department said at the time that it was “fair and necessary” for the projects to participate.
The Department’s consultations will close to responses on 22 May.
As expected, green campaigners have met reports of the BEIS announcement with excitement, given previous reports into how policy has hampered onshore wind installations since 2015.
“After years of campaigning, today we can finally celebrate the UK’s cheapest new energy source – onshore wind – being brought in from the cold,” climate campaign charity Possible’s Alethea Warrington said.
“As our cheapest source of clean energy, onshore wind is hugely popular with people in the UK, who understand that we need to use all the tools in the box to tackle the climate crisis.”
Greenpeace UK’s executive director John Sauven took a similar stance, saying: "Onshore wind and solar are not only some of the cheapest sources of energy, reducing costs for everyone, but they are a vital part of putting the UK on track to net zero as quickly as possible.
"The government now needs to engage with local communities in order to get large amounts of onshore wind and solar off the ground. Leading by example, by tripling the UK's wind and solar by 2030, is a prerequisite for successful UK leadership at this year's global climate talks in Glasgow [COP26]."
Christian Aid welcomed the move but said the UK Government should now do more to support cost-effective renewable solutions in its overseas financing, following damning reports about fossil fuel deals made at the recent UK-Africa summit and by UK Export Finance more widely.
"As a historic polluter, it’s only right the UK leads the way in rapidly decarbonising our economy and so we must use all the clean energy sources we have at our disposal," Christian Aid's head of policy Dr Alison Doig said. “If we are going to tackle the climate crisis, these are the kinds of solutions we need to see being rolled out all over the world."
Within Westminster, Green Party MP Caroline Lucas and her colleagues have been celebrating the decision. Lucas Tweeted: "Astonishing it’s taken this long but the Govt is finally lifting barriers to our cheapest renewables. Ban had led to new onshore wind capacity falling to lowest level since 2011. I & many others have been calling for this for years."
Nonetheless, criticism is expected to come from certain Conservative Party circles. Several Ministers and backbench MPs had previously hailed the 2015 policy changes as a victory for local communities concerned about the visual impact of onshore arrays, and for other parts of the energy sector such as nuclear and offshore wind.